Repost of article:
China Gets U.S. Military Phones
By Timothy W. Maier
The United States has helped to build the Chinese military space
telecommunications network, a system that is so sophisticated that it
can be used without interception:
In 1994 President Clinton boasted that building a mobile cellular-phone
network with American technology for the Chinese people was good
economic policy. That was White House spin, say critics, and it has
come undone. According to recently released Commerce Department
records, the White House knew for some time that this state-of-the-art
system was to be hand-delivered to the People's Liberation Army, which
had become partners in a massive telecommunication business
enterprise with China Telecom, a government-controlled company.
While some debate remains about whether the People's Liberation
Army, or PLA, actually is employing the system, there is no doubt that
profits from this billion-dollar industry trickle down to build ever more
weapons of mass destruction that someday could be used against the
United States.
And there is great concern among China hawks in U.S. defense circles
that this so-called "cellular system," when linked with a satellite
network, could enable the PLA to suppress political resistance,
enhance its command-and-control communications and spy on U.S.
allies in Asia.
And who paid for this sophisticated telecommunication system?
Unknowing U.S. investors may have footed the bill when one of the chief
Chinese backers borrowed money on the U.S. bond market -- an action
that has led to calls from frustrated China hawks to push forward the
U.S. Market Securities Act. This is legislation that would create a new
Securities Exchange Commission Office of National Security to monitor
the U.S. fund-raising activities of companies with ties to the Beijing
regime. But any such law would be too late to stop the mobile-
telephones project, already well under way.
Clinton initially painted it as a humanitarian deal. A cellular-phone
system for China not only could save lives in emergency situations,
improving communications during floods or other natural disasters, it
would be an economic boon for U.S. corporations that want a piece of
this billion-dollar venture. Not surprisingly, a host of U.S. companies led
by Loral Space & Communications jumped on board. Beijing then
tapped the U.S. bond market to finance the deal, never telling individual
investors that their retirement savings would be used to fund the project.
After all, under current law such disclosure is not required.
The PLA was involved in the deal through China Telecom, says Eric
Harwit, associate professor of Asian studies at the University of Hawaii,
who is working on a book about the Chinese telecommunications
industry. "The PLA had frequencies they didn't need for military
purposes, so they decided to use it for commercial purposes and do the
joint venture."
But Harwit disputes China hawks who claim the PLA will be employing
the system for military purposes. Instead, he says, this is a business
opportunity for the PLA to make a profit, though it may not last. Under
pressure, the Chinese government has ordered the PLA to divest from
all commercial enterprises. "I don't see how the PLA is going to
proceed" with such divestiture, he says, adding that they naturally have
been reluctant to pull out of business opportunities that are profitable.
Regardless of whether the American-designed system is used for
military purposes, and it is hard to see why it wouldn't be, it puts money
in the PLA's pockets. And so the question is whether the White House
misled the public about the venture by claiming it was a humanitarian
project to aid the Chinese people rather than to strengthen the Chinese
military.
"They knew," insists Charles Smith, president of the Richmond, Va.-
based Softwar Corp., a computer consultant who relentlessly has filed
Freedom of Information Act requests to learn government plans for
controlling and exporting computer encryption. "They knew they were
directly dealing with the Chinese army," he says.
Smith points to 1994. That year, while Clinton gave assurance that the
project was for "civilians," his commerce secretary, Ron Brown, secretly
met with Chinese Gen. Shen Rong-Jun to discuss building the mobile-
phone network, according to recently released Commerce records.
Rong-Jun, who is deputy chief of the Commission of Science
Technology and Industry for National Defense, or COSTIND, is in charge
of the PLA's satellite program. In addition to serving military purposes,
the PLA stood to make a handsome profit by venturing into the satellite
pay-per-view broadcast system, as well as profits generating from
millions of phone calls.
Rong-Jun teamed up with billionaire Li Ka-shing, chairman of the Hong
Kong-based Hutchison Whampoa Ltd., the Red Chinese merchant
mariner. Ka-shing was found guilty of insider trading and censured in
1984 by a Hong Kong tribunal but continues to be a prominent player.
He sits on the board of PLA arms dealer and White House kaffeeklatsch
guest Wang Jun's company China International Trust and Investment
Corp., another PLA-allied giant.
Hutchison is the company that beat out the U.S. bid to control the
Panama Ports. Last year Ka-shing also turned to U.S. investors -- and
issued $2 billion in bonds. The Beijing borrowers never said how the
money would be used but, according to Dow Jones Newswires,
Hutchison revealed in the bond issues that its 50 percent-held
subsidiary known as Chung Kiu Telecommunication Ltd. has signed
agreements to provide cellular services and equipment to joint ventures
between the PLA and the Chinese Ministry of Posts and
Telecommunications, or MPT.
Likewise, Smith noted in 1996, U.S. Ambassador to China James
Sasser stated in a report that the "PLA has for some time been
discussing with the MPT the possibility of using frequencies allocated to
the PLA for establishing a mobile-phone network based on Code
Division Multiple Access technology," according to records obtained by
Insight.
Loral Globalstar satellite cellular phones rely on this precise system
and have supplied it under contract to the U.S. military. Loral, whose
chief executive officer is Bernard Schwartz -- one of the biggest
Democratic Party contributors -- needed a special waiver to sell the
system to Beijing. In 1996, Clinton signed the waiver and Loral sold the
technology to the PLA. A few months later Clinton moved the satellite-
application approval from the State Department to the Commerce
Department -- a move that was lobbied hard by both Schwartz and
Hughes Electronics' president Michael Armstrong, now head of AT&T.
And remember that the cellular phones are not the only
communications project the PLA controls. Amid concern about rocket
failures -- including a 1996 explosion that destroyed a $200 million
satellite -- Rong-Jun contracted with Hughes Electronics of Los Angeles
to purchase $650 million worth of U.S. satellites to be used for
telecommunications. This hardly can be a civilian enterprise, according
to consultants and national-security experts. Virginia
telecommunication consultant Andrew Frie says the price is troubling
because there seems to be no way to get a financial return on the
investment.
So was something else involved in all of this satellite networking?
Edward Timperlake, a U.S. national-security expert, says this system
greatly could enhance command-and-control communications for the
PLA and create "an unbreakable system" that not even the National
Security Agency could tap. William Triplett, former general counsel for
the Senate Foreign Relations Committee, says these satellites have
special antennas that "might be used to spy on Asian military forces as
well as handle PLA encrypted tele-communications." The prime targets,
Triplett says, would be India, Taiwan, Japan, South Korea, the
Philippines, Malaysia and Singapore. "This system is so big, it could be
used for the People's Armed Police to suppress pro-democracy
movements in the countryside," warns Triplett.
Rong-Jun asked Hughes to place his son in charge of the project. "He
put his son in there to make sure Americans didn't put a trap door in"
that would allow the United States to monitor Chinese communications,
says Triplett, who along with Timperlake recently authored the New
York Times best-seller The Year of the Rat.
However, when New York Times reporter Jeff Gerth revealed that Loral
may have violated the law by faxing to Beijing a classified analysis of
what caused a 1996 Chinese rocket explosion, the State Department
blocked participation by Rong-Jun's son in the project. Following
Insight's series of stories that raised questions concerning the security
clearance of engineer Wah Lim, whose assistant faxed the sensitive
1996 rocket-explosion report, California Republican Rep. Chris Cox
launched a congressional probe. Both Loral and Hughes have claimed
they did nothing illegal in helping Beijing. Lim also maintains he is
innocent. Congress subsequently placed on hold all satellite-technology
deals with China until these probes conclude.
After the press exposure the White House this year changed its tune by
acknowledging that the mobile-phone network sold to the Chinese
military would have dual capabilities -- not just civilian -- but claimed it
primarily would be used for civilian purposes. The White House also has
said that Beijing would get the system from another country if the
United States refused to cut a deal.
Encryption expert Smith, who has been following this story with keen
interest, doesn't buy the latest White House spin. "The question," he
says, "is who were they going to get it from? The Germans sold them a
system. It didn't function. The Russians wouldn't put it up for them. Loral
offered the best deal."
Meanwhile, great damage appears to have been done as a result of the
report faxed to Beijing to reveal what was wrong with China's
intercontinental ballistic missiles. And the trail to how that damage
report came to be provided to China could lead to the White House
should House Judiciary Chairman Henry Hyde of Illinois call former
Justice Department prosecutor Charles LaBella to discuss a secret
memo advocating the appointment of an independent counsel to probe
the White House for possible illegal fund-raising activities involving
China.
The memo triggered a firestorm between House Government Reform and
Oversight Committee Chairman Dan Burton of Indiana and Attorney
General Janet Reno, who was cited by Burton's committee for contempt
of Congress. What's in that memo? No one who knows is saying. But
Hyde could obtain it and investigate, if he dare.
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